Ultragenyx Pharmaceutical Inc. (RARE) Earnings Call Transcript & Summary

All right. Good afternoon, everyone. Thanks for joining the afternoon session. My name is Dave Ona. I'm one of the biotech analysts here. With me for this next 25, 30 minutes, we have Ultragenyx. And with me on stage, we have Founder President and CEO, Emil Kakkis. Dr. Emil Kakkis, we'll start off with a short intro of the company, a couple of slides accompanying it, and then we'll jump right into the question.  So with that, Emil, thank you.

Thanks for having me, Dave. I'm good to be here. So our forward-looking statement. As a company, we were formed in 2010. So this is completed 12 years. We're in the 2013, '14 IPO class. And we have a growing commercial revenue, we talk about now with 3 products, the fourth product we just acquired with high growth. Plus, we also have a strong clinical pipeline with 5 programs at Pivotal or post pivotal and combine that, we have not just ultrarare that we have other large wearers. And I think it puts us in a unique position as a rare disease company. There's 3 franchises, CNS metabolic on endocrine, and 5 programs beneath those. It puts us in a very strong place to be very good at 3 different areas of medicine, which I think are -- where there are very good solutions and with high probably success. And that's how we've chosen our pipeline. One of the things I want to be clear to people is that we're a company with growing revenue. We've had -- this is our growth of revenue, product revenue, not other revenue, but product revenue growth, showing very strong growth over the year. We expect to have a greater than 30% growth rate going forward. And we think that will continue with Crysvita will continue to grow as well as our other pipeline assets.  Finally, on the whole expense side, our OpEx are going to plateau. We're prioritizing our high-value programs, staging some early-stage programs, managing FTEs, and we expect a significant decrease in net cash burn. In 2022, we had a lot of one-time items, which is one to be clear, -- the Street, included the GenX acquisition, the acquisition of KSA as well as the manufacturing plant. The plant is now completed. It's starting -- beginning to operate. And we'll open crack a lot for GMP production early in the year, which will help improve our cost structure for gene therapy in the long run, investment we had to make. But those items are not recurring. We expect to have a significant decrease in net cash burn. One of the things is questions that come up is catalysts. We have new catalysts, a lot of other catalysts going on for 2023. So late this year and early next year, the gene therapy program nearly enrolled 401, and we'll have a day. It will take about a year from the last, but you at least find out the study is fully enrolled. Our setrusumab program for OS and Perfecta, I think an important one will have a Phase II readout early in the first half of the year, midyear, which will tell us about how the drug works in very young children. It works very well in adults. GTX12 we're less specific on when we're finishing the first -- the dose escalation cohort, the expansion cohorts will be beginning early in the year. The Wilson program now is unblinded. So Stage 1 will get enrolled and will allow us to put out data at the end of the year or early '24. There will be 6-month data on all 3 cohorts in the dosing part of the study. DCI wants to start starting. But I think you'll see a lot of more pipeline catalysts in addition to our revenue and growth for the company as a whole. So that's a summary. I think we're in a very good position in the company, I think about 12 years in mean the secretary to be where we are right now with these products and growth, and I'm excited about the future for the company, both in the products and our ability to reach patients around the world.

Great. So thanks for the intro. Maybe we'll just start right into -- with the portfolio -- your commercial portfolio. Can you remind us your guidance for the year, things have changed a little bit in terms of Crysvita economics. Yes. So in terms of your commercial portfolio, where are things are with Crysvita, DOJOVI, and MEPSEvI, what's the guidance been? What's the trend been in terms of those sales for the remainder of the year?

Well, we reiterate that our guidance will be on track probably in our guidance. We had kind of a lighter third quarter, but I think we've -- the start of the year went slow because of Ameron and what happens with Crysvita is that we need to find patients and nor to find patients that we have to be in the field. And so we had a number of employees who got sick with Omicron like everyone else. So December, in the first quarter, we basically got behind on patient find, which has some effect on our ability to convert to treated patients. So we find patients we have a high fraction of turning them on to get on to drug and 50% of the scripts now are new doctors writing scripts for the first time, right? 50% of all the scripts now. So there's a lot of doctors with 1 or 2 patients that were continuing to drive. So I think we're starting to -- after Urecon, the depression of patient fine, start forms. We're seeing that turnaround now, and we think we'll have a strong fourth quarter. We'll keep us on track to meet the guidance that we have put out. For DULJOBI, we're in the range as well. I think Jobi from a start form perspective is actually exceeding our expectations to Starpharma by a lot. But the dosing people are using is more traditional with MCT like oils they're dosing a little bit lower.  And so that's -- we have to get them dosing correctly because the dosing for digital is higher than what they're used to. So we have to make sure the good part is that they're dosing, it's a great start. It's a lot easier to adjust the up-titration of dose than it is to get people started. So we're encouraged about DOJOVIA certainly beat our expectations. So we expect to be on track for our guidance for the year. We really want to be beating and raising, right? That's what you want to do in commercial. And so I think COVID has made it hard for us. We've held the line during the trial when COVID hit, right? A lot of people got hit hard, we didn't because we had a lot of home care for all our patients that kept us on track. We did lose some ground earlier in the year, and I think we need to get it back. The new deal we did on the amendment will allow us to stay in the field one more year. and we're sharing cost of that cost for that effort.  That will help increase the total amount of commercial spend in Crysvita, which I think will help drive up more patients found and more star form. So I think that will be great for the franchise. They are coming in earlier to help them get going. So we'll have an overlap of the 2 companies, which I think will provide an increased level of commercial pressure because these are the type of product that it will respond to pressure. That is the more patients we find, the more we get on drugs. And when they get on drugs, they stay, they have high compliance and persistence. So each found patient is very valuable. So we think that should help us in Crysvita and hopefully get us in a pattern of increasing our projections. But right now, we're pleased to have a working relationship that will allow us to put more effort behind Crysvita.

And then a 2-part question before we pivot into the pipeline. The OMERS deal that you did, can you just frame for us the timing, why you had to do that OMERS deal because it's already kind of that royalty stream and profit share is kind of complex the way we know it, and then you've got the health care royalty deal and then now you've got owners on top. How should we think about that? And as it pertains to your extra year of commercialization for Crysvita, you've laid out your operating expense goal. Any change to that? Is it going to be on the higher end? How should we think about that going forward?

Yes. So we sold -- the prior Royalty Pharma deal was to sell the European royalty, which people hadn't really considered important to us. In this year, we sold a portion of the U.S. royalty to manage our capital needs and to do it in a way that was protected with equity. We didn't want to do more than that, but we needed to do something. We had in our plans the deals that we have done, the plant capital investment, the investment in genetics, which was expected as well as the HSA deal. So we have some capital needs, and we had overall operating needs. So the $500 million, I think, were extremely important at putting our cash position where it needed to be, but we don't want to do more of that. Now the rate and the deal we got, I think, was very good because the cap is pretty low, and the rate of return is, I think, more modest, given where things were probably headed, and the people are really good people to work with. And -- so I think it was a very good deal for us, and it's better in doing, let's say, convertible debt or other types of instruments we felt. And -- but we don't want to give up all of our revenue stream, right? We gave a portion of it for a while to allow us to get through this period. But given our growing revenue and given more diligence on the operating expense front, we think we can close the gap and put our on track to having a consistent decrease in net cash burn heading toward profitability. So it was really about a bridge, but to this point in time where our revenue was growing. And I think it was the best deal that we could do at the time and one that wasn't dilutive.

Okay. Let's pivot to GTX-102. You just mentioned genetics acquisition. You shared some data in July of this year, some additional updates in terms of timeline going forward. So if you can reframe for us when the next update would be and the substance.

So in July, we put out the first piece of data, we felt it was important to do it for several reasons. One was we now had 9 patients worth of data. We've gotten through the loading period. We had shown safety, and we're seeing, we thought good activity even at the lowest doses, which told us the drugs active. We can do this. That means we're in the dosing range even if it's not optimal dosing. And our intent at that point having negotiated a lower-cost buyout for genetics that would be earlier instead of waiting. We decided to do that at the same time. So we put out the information to understand why we're doing it. Now I think people are expecting more efficacy, but the truth is at the low end of the range that we knew that, and that was, I would say, expected. I would say the fact we saw activity in the low in range to me was encouraging because it meant we're in a therapeutic range. And we verified with another 9 patients of what we saw before it was real. Now since that time, what we're doing is accelerating the -- we're doing dose cohorts starting at ever higher doses. And we're doing this steadily step-wise to be safe, to make sure we're seeing safety before we escalate to the next level. And we don't want to do a lot of patients at the east dose level because we want to move into what we think is a 10% to 14% range, which is where we think the pharmacokinetic-pharmacodynamic should be optimal. If we look at our non-primate data that between 1 to 2 milligrams, which is in the 10% to 20% range is where we see a 10, we see near 80% of the MAX treatment effect at 20%, it should be the maximum. So in that range where we expect to see good effect.  And so 10% to 12% should give us near maximal effect. So the titration up to that level will allow us then to show that we can low if we load that level 4 doses, and we think we'll get to the drug effect that we're hoping to see. And once we've done that in safety, what we said in our last quarterly call is that we have multiple patients who have been exposed to 10 and 12, and 1 patient was at 14. We're not seeing the problem at all, and we expect to have those dose cohorts completed this year and that our expansion will begin in early '23. The expansion will put 20 patients on the higher doses now and 10 or 12 young, 20 old, and will allow us then to collect data after loading of 4x plus then some extension data from that. And that will be a larger pile of data that we should be able to put out. Now we were not waiting until all that's completed. We'll find a point at a time where we have enough of the current patient data plus a new expansion data to feel confident that we can talk about on the drug effect is real, and it's clinically substantial. And therefore, we can think about planning for a Phase III trial and discussion with the regulators. And two, the safety is good, and doing what we expect.  And that won't require all 40 patients, maybe some fraction of them. We're trying to be less prescriptive of when the result is going to be because we're trying to wait until we have a substantial amount of data to put out information. But right now, we're really encouraged where we're at. And we feel we can dose in the range we need to be -- and we're encouraged that the data we've seen in primate have replicated in human that they're in. They're really working at the same dose range that we saw before. So I feel pretty comfortable where we need to be. On the U.S. side, we are working to open the U.S. to this expansion. We have data that the FDA has wanted on immune response. We've also redosed 2 of the patients in Canada and shown no significant problems. In fact, they're doing well. And we have all the other testing that they requested. So we'll be submitting to them and getting -- looking to get the U.S. open too. If we get the U.S. open, that will help the expansion. We're also opening other sites for the expansion, the idea is to open up any sites we might want for Phase III and get them trained during Phase I. -- since they learn the methods and are offset in tuned, we have an agreement so that if we get to a point of making a decision on Phase III, we can do it and have a bunch of sites that are ready to go that know everything they need to know. So it's about using Phase II to help prime and set up for Base III. So that's a big picture. It's a lot going on there, but I'm highly encouraged about where we are. And I think the data I thought were strong. And I think there -- the higher dose will get us, I think, to the right place.

I think the latest commentary you provided was 2 U.S. patients have now moved into the Canadian sites to resume dosing. What qualitatively can you comment? Because they -- when they stopped dosing, they had started progressing on disease again. Anything that you're noticing in terms of reversion or inflecting of that curve or any additional observations?

So for patients -- this is patient #1 and #2 from the prior trial. So one had 5 doses, one had 4 doses before. Patient 2 is the young one who had learned a lot of words and had great improvement growth in one fine motor, like a lot of things that patient 2 had done really well. Patient 1 had some good improvements with an older kid. Both those patients had effects that lasted 4 months, 5 months or so. Patient 2 had some stuff that didn't go away, like some improvement are walking, had one word. Patient 1 has done 4 doses. Patient 2 has gotten 2 doses, and they appear to be having some effects again. So we're encouraged. We haven't put more out than that, but they're not having any safety problem. Seem to be some effects again, and people are happy. We have the other patients who want to get treated, Patient 5, particularly who was the one that got one dose before but had a really good effect, had a significant side effect but also had a really positive effect that parents have been pleading with me to get treated finding way. So we're working to find a way for that fifth patient to get treated. But I'm encouraged we can get going again. I think we believe that information will be helpful to FDA because it kind of reduces their concern that there would be like a hypersensitization that would make it worse if they got dosed again. Since that hasn't happened at all, it kind of removes that mechanistic fear from the FDA. I don't think there was any justification for it, but it doesn't -- it still removes the fear.

So if we think about the data and what you just said about what the FDA has requested, you basically have all of that information. Is this something that you might be, I don't know, submitting before year-end or early next year that you can start activating those sites?

We'll submit it before year-end and start working in the process. The people are anxious to get going. And I hope -- I think the data will solve all the things they've asked for. So I feel like we've done all if needed. And the fact that we treated a lot of patients at 10 or 12 now. Remember, they allow us to go ahead at 2. But we have a lot of people who dosed at 10 or 12 right now, multiple doses. So I think it's pretty clear that there's a bigger safety range. And they're just conservative. And I think we have everything we need. We have that filed. And I expect within the short while to get that straight, which would be great to get us all in one program.

I guess the other question we had is investors ask a lot about what do we make of CGI. You went from CGI, and then you also provided CGIS, but you've also provided Bailey Orca. At your next readout, what should investors be focusing on?

This acronym soup is kind of a problem. I actually told the team to stop calling it CGIS because it's too confusing. CGI should be just the comparative on global impression scale. The other one, we're going to call the agents very scale. So you don't have 2 sizes with 1 letter change. It's like sometimes people are too deep into their technical details. They know how to brand a little bit. So the Angoverity scale, I think, is very valuable because it's not a comparative scale, it's saying, it's a list of problems, how long do you sleep, do you sleep like the agri is very sleep scale. It's a quantitative, -- do you have 3 hours of sleep, 2 hours sleep, how much? So I think angel Severity Square is a quantitative scale system. I think it's good. The CGI is the relative scale compared to that kid, how they work at baseline. Are you minimal better, moderately better, or much better? Now there's some guidance of what those mean, but they're still subjects that physicians interpret. So that means CGIs will be more relative, more variable, but probably more sensitive to individual patient change. But as we said, even when we originally put out data, I don't think you should rely on CGI alone to make decisions. The quantitative and objective data should go hand in hand.  I see that because there was an example where someone has CJS, I was positive, but all the objective score should be nothing. That to me is concerning, right? Phase III study didn't succeed. Our situation, we're showing CGI scores, whether it's plus 1 plus 2, but we're showing the quantity core that are moving. And these are for things like the Bailey, and I've done the Bailey for years, and have never seemed to get better. Open-label. It doesn't matter. -- Open-label anema label study, daily has not changed ever. And the milestone worsen me on this to our endpoint has our endpoint group -- we've both -- we've never seen a change. So when we see the movement that we're seeing. We said this is real. When it's outside the statistical variation of the method, it means these changes are not something that are randomly occurring that there's a real movement. So I think we're seeing a real meal change. So in some instances, plus 1 or plus 2, but we're seeing quantitative change here that I feel like we have a justified thing. If we're seeing a change in different domains, Angan severity score in sleep, for example, showed 3 out of the 6 kids had from very profound change of sleep. And you saw the verbatim which are in our deck show how meaningful that is. I think that's even at the lower doses degree? That was at the low doses that are on the new doses. So I think it tells you that CJ scores are useful, but I think they should be anchored on quantitative scores, and you shouldn't have one work and not the other. Because to me, that's in can grow us with truth. -- truth should be you should be sale to see something with quantitative scores, which are less sensitive but more accurate. And with Realtiescores, maybe more sensitive but more subjective.

Not to beat a dead horse, but for guys who don't have enough experience assessing these daily or the CGI scale. If you were to have somewhat of a discordant readout where Bailey shows certain data, but CGI doesn't necessarily follow through. What should we be thinking about as the greater importance or greater readout?

Well, I think the quantitative scores are anchored in a test of a certain amount of effect. And I think that's a stronger anger thing. I think you can have an improvement that might be below the improvement of visible to quantitative test. So that's one place we might see discordant. The other place is that some people have different ways of interpreting. So in our case, we had some plus 1 in some of our viscose some people would have said plus 2. But the directionality was correct. It's just how much. But if you looked at the actual quantity of scores on expressive and receptive communication, which are in our deck, you can see there were single and double-digit statistically significant above the range of variation in 6 out of 9 patients, and they were being scored plus 1 for that. So they were being recognized and improving -- but what -- how much improvement is an improvement. I think the directionality was there. You get what I'm saying. So it's not like someone said no improvement yet, there was improvement here. There's no doubt that there can be variation in things that are developmental. This is true. That's partly why you kind of need by expanding the study and getting enough patients in the pool will hopefully get a little more power and a little more -- so we're not reading the tea leaves off a few people that we're talking about a larger group of patients. But we didn't want to do that until we got to a dose level that we felt more confident was going to give us a consistent effect on a wide range of patients.

Any interim updates or guidance from the regulators in terms of what they would like to see in terms of clinical benefit?

We haven't had that specific discussion yet with them. But I can tell you from the past, the use of a CGI score to the primary point is unusual. It's unusual because usually, the FDA likes endpoints are grounded in quantitative clinical benefit kind of terms. CJ score is the relative scale of investor impression, and it's less incredibly anchored. And so in general, I was surprised when they accepted the CGI. So I would assume that CGI since it has been allowed before, becomes a precedent. They would allow it again. However, we're going to look more at the quantitative measures, we think, but we could go with the CGI. But I think if you look at expressive receptor communication are at the top of what others families, right? So that is an area where I think -- and with the deletion type patients, they have the most impairment. So in some ways, that's probably an area which I think would be useful. There haven't generally been a lot of work on communication scores, I think in the Brineura program, there was a language score is one of the assessments they did. But we think that would be one that would make sense. I do think sleep, which we have a great effect on, is important to patients.  It's among the top few, and maybe somewhere between 80%, 90% of the patients have some sleep deficit, some with severe sleep deficit. So I'm sure that's a high value, and certainly for the patients in our trial so far that's been a big value. I think if you look at beyond that, fine-motor gross motor probably in behavior or the 3 things to look at. Fine motor, it's a little bit more about patient functionality using a fork, using a spoon, catching a ball, doing things with their hands. With gross motor, it's more about walking and not falling down on uneven services. For example, Angelman patients can't walk on grass very well because the grass is uneven, and they catch their toes and they fall. So they're just falling down, falling too constantly, which is disturbing because they get hurt when they fall down. So -- or any kind of uneven or walking uphill, for example, like a slant, they can't lift their toe to land. And so walking and falling down is certainly another one that would be important. So there's a lot of choices in there. But I think express or receptor communication is one where there's a lot of validation, a lot of quantitation, and we're seeing a lot of effect. And I think for the type of patient, I think that would be a big one. My hope is to do a multi-mine responder index, but I don't think we want to get into the arcane details of detailed statistical analysis of data. But I can say to you, if you ask parents, there are multiple domains that matter. You can put anyone you want as primary, but all of them will matter. And if a drug improves receptive communication following instructions listening to their name, if it improves their ability to sleep through the night without waiting, improves their behaviors, they're not aggressive. And if their ability to feed themselves and not fall down, right, you can bind that together, right? That's a real important drug.

The dose, based on your Phase I, the U.S. trial experience, you've tapped it for the subsequent trial 14 mg. But earlier, you mentioned the preclin data showing you that 10 to 20 meg to be the efficacious range. What's -- based on what you've seen so far, do you feel the need to maybe amend the protocol to elevate that level to like 16, 17 mg?

Well, we're still learning. I think the 14 cap was agreed on with authorities was arbitrary, and it was just based on 20 was the lowest dose at which we saw an issue. If we see a lot of patients doing well with the new administration strategy, it's possible we could go above the 14%. I don't know how much more we have to get to, but it could be particularly for older patients, right? When I'm talking about kids or older that going up a little higher, it could be better for some. But by doing the expansion, we'll get an idea of a range of patients, a large number of patients over range. And if we saw some of the bigger patients being, let's say, not getting as much effect as we'd like. I think at that point, we could ask to titrate them up a little bit further and open up the protocol a little more. But it's really about step-wide -- it's getting agreement on the line until we know. So I'd be more thinking about the older patients. I think the young patients that the range we have is fine. I think it should be fine.

Maybe in the last 2 minutes, if I can ask you, what's sort of your current thoughts on BD? We've had FQIS, we've had Abeona. And I think a lot of people kind of -- at least in my communication, they were surprised when those deals came through because they weren't anticipating that. You had also talked about for a company your size, the pipeline is pretty full. So how should we think about your BD appetite going forward?

Yes. So I think to explain Kesa, we have been looking and had found some assets we liked that were solid biologics that were not gene therapy that we felt had a good model going forward. In that case, with efficacy, weren't planning to be an HFA, but Regeneron with interest in us partnering with them on it, and we're willing to do a deal that made sense for us. And it gave us another biologic protein, which has really excellent data, and we feel underappreciated, but I think we'll do very well in the clinical HF population. So I think it's very rare that you can get for $30 million upfront, get the worldwide ex U.S. rights for a product that's already approved, right? That's a novel mechanism, a high-quality monoclonal antibody. I just think that's a solid asset to add to the portfolio that it's a low-risk asset, right? In my view, we had added a lot of high-value, but higher-risk assets.  And this is a lower value but maybe a solid win. So that's the way that one -- we're going to be very thoughtful about choice and BD. We have plenty of cash, but we also want to manage our spend and growth. I think we've got plenty of pipelines right now. I have many people offering us stuff, but we're really not in the mode right now. We'd have to have something with very high fit, high value to make it worth us doing anything right now. I think we're going to most focus on getting done what we have in front of us. We also picked up the MPS IIIA gene therapy. That wasn't intended or planned. It was a little bit more of a mercy mission for a drug that was working for which wasn't going to get finished because it is gene therapy. It's something we knew really well. And disease area, we knew very well. It felt we could run it with relatively lean organization. And it's post what we think is efficient data to get filed. So we feel like it's a way to get a quick win on the gene therapy, but it's more like a Zolgensma model in terms of treating really young people and saving them. So we think there was value in that. Of course, we didn't pay anything for that, right? And there's just some royalties downstream However, we won't be -- we have a full pipeline. BD will be very smart and restricted. We've done the deals we need to do, genetics, ex U.S. product. I think we've got enough to get to where we need to go.

Well, with that, thank you, Emil, for being with us today and enjoy your trip over to London.

Thank you.